Kobe Steel Group Vision 「KOBELCO VISION “ G ”」 - Rebuilding the Business Foundation for Stability and Growth - 1 Fiscal 2013-2015 Medium-Term Business Plan May 29, 2013 KOBELCO VISION “ G ”
Kobe Steel Group Vision 「KOBELCO VISION “ G ”」
- Rebuilding the Business Foundation for Stability and Growth -
1
Fiscal 2013-2015 Medium-Term Business Plan
May 29, 2013
KOBELCO VISION “ G ”
―CONTENTS―
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‣ Framework for the Kobe Steel Group ‣ Business Conditions and Financial position of FY2010-2012 ‣ - Rebuilding the Business Foundation - <FY2013-2015 Medium-Term Business Plan> ‣ Laying the Foundation for Stable Profits and Business Growth ‣ Our Dividend Policy
KOBELCO VISION “ G ”
Framework for the Kobe Steel Group
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Has a presence in the global market
Maintains a stable profit structure and a strong financial foundation
Prospers together with its shareholders, business partners, employees and society
Integrat ing the knowledge and technolog ies of d iverse bus inesses
in mater ia l s and machinery, Kobe Stee l a ims to become
a corporate group that :
KOBELCO VISION “ G ”
[Release at April 14,2010]
Concern over the European fiscal and financial crisis
Appreciation of the yen and continuation of the extremely strong yen
Slowdown in growth in China economy
Concern over power shortage
Worsening relationship between Japan and China
Business conditions
Economic progress and rise of
capabilities in emerging countries, such as China
Gradual recovery of the U.S. and European economies after the Lehman shock
Move to bolster natural environment protection and a low-carbon society with energy saving needs due to soaring resource prices
Appreciation of the yen with the dollar in the 90-yen range
FY2010 Business conditions assumed
when formulating KOBELCO VISION “G”
4 KOBELCO VISION “ G ”
Natural disasters
~FY2012 Changing business conditions
Great East Japan Earthquake Flood in Thailand, etc.
Growth of U.S. economy, demand for shale gas
Continuation of the growth in emerging nations
Concern over financial institutions in Europe
Problem of over-capacity and environment in China
Elevated resource prices Correction of the extremely
strong yen → Increases in the prices of imported goods
Power shortage, increases in power consumption and cost
Consumption tax increase (consumer slump) ⇔Pulling out of deflation(?)
FY2013~ Business conditions
assumed from now on
Financial Performance in FY2010-2012
5 KOBELCO VISION “ G ”
◆Ordinary income (100 million yen) and D/E ratio (times)
D/E Ratio (Right side)
Ordinary income
(left side)
Actions taken in FY2010~2012
6 KOBELCO VISION “ G ”
Segment Main Capex
Iron & Steel Introduction of hot metal treatment plant, heat
treatment furnace for steel plate, and a high-efficiency private power generation plant
FY2012~
Iron & Steel Constructed production line for high-strength steel sheet for auto bodies in the U.S. FY2013
Aluminum & Copper
Established a base in China to make automotive aluminum forgings
(Established production locations for suspension parts in three major countries:
Japan, the U.S. and China)
FY2012
Machinery Made capital injection into a maker of large-capacity compressors in China FY2011
Kobelco Construction
machinery
Established Global Engineering Center (GEC) (Optimization of production and development) FY2012
earn stable profits and to meet demand in growing markets
7 KOBELCO VISION “ G ”
Step to Stable Profits and Business Growth
Rebuilding the Business Foundation
Laying the Foundation for Stable Profits and Business Growth
Stable Profits and Business Growth
FY2012 FY2013 FY2014 FY2015 FY2020 ∬
Rebuilding the Business Foundation
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Rebuilding the business foundation
to withstand global competition by strengthening the
financial position and competitiveness of each business
KOBELCO VISION “ G ”
1. Strengthening the Profitability of the Steel Business 2. Securing Sales Volume in Growing Sectors and
Regions 3. Improving the Competitiveness of the Company 4. Improving Financial Performance
1. Strengthening the Profitability of the Steel Business
10 KOBELCO VISION “ G ”
Profit improvement plans for Iron & Steel Business
Equipment investment effects
Cost reduction at production sites
Improving raw material costs
Reduction of fixed costs, etc.
FY2013 Compared
with FY2012
4.0
12.0
8.0
6.0
TTL
FY2015 Compared
with FY2013
19.0
10.0
0.0
1.0
30.0 30.0
TTL Compared
with FY2012
23.0
22.0
8.0
7.0
60.0
(1) Changing the depreciation method 18.0 (2) Inventory valuation, etc. 20.2
TTL 68.2
Iron & Steel Business Ordinary income
FY2012 ▲50.2
FY2013 18.0
Other reasons for increasing profit(FY2012→FY2013)
Amount of an effect (Billion yen)
2. Securing Sales Volume in Growth Sectors and Regions
11 KOBELCO VISION “ G ”
Emergin
g nation
s
and
North
Am
erica, etc. Growth fields Growth areas “Only One” Products
Creation of New “Only One” Products
Automotive field
Energy field
Natural resources &
environmental fields
◆High-strength steel sheet ◆Special steel wire rod and bar ◆Aluminum panels ◆ Aluminum forgings
◆Marine structures, steel plate and welding materials for energy field ◆Large-capacity compressors, etc.
◆Gas-based direct reduced iron plants ◆FASTMET® ◆Water treatment plants, etc.
◆Compressors ◆Hydraulic excavators ◆Crawler cranes, etc.
Infrastructure field
Materials business
Iron & Steel Maximizing profits by manufacturing high-strength steel sheet for auto bodies in the U.S. and wire rod processing
Aluminum & Copper
Sales expansion by boosting production capacity of bases for aluminum forged products
Machinery business
Machinery Sales expansion by utilizing a Chinese manufacturer
Kobelco Construction Machinery
Secure unit sales in China, Southeast Asia and India Sales expansion in the U.S. and Europe
Engineering Supporting earthquake recovery 12 KOBELCO VISION “ G ”
Machinery business
Materials business
Plan for Securing Sales Volume FY2012
34%
Overseas sales ratio
FY2015
about 40%
FY2013
35%
3. Improving the Competitiveness of the Company
13 KOBELCO VISION “ G ”
Amount of effect in FY2015 (vs. FY2012)
Labor costs /efficiency improvements
Reduction of F costs
Reduction of V costs
“Monozukuri-ryoku” strengthening
1.0
10.0
15.0
4.0
Labor costs /efficiency improvements : Pay cuts for executives and managers, increasing work
productivity of staff, etc.
Reduction of F costs : Reduction of maintenance costs, cutting down expenses, etc.
Reduction of V costs : Getting competitive quotes, central buying, buying from overseas, etc.
“Monozukuri-ryoku” Strengthening : Reduction of Quality Failure Cost, promoting energy
savings, etc.
●Actions
TTL 30.0
(Billion yen)
4. Improving Financial Performance
14 KOBELCO VISION “ G ”
Maximum 1.0 times in or after FY2016 (fiscal discipline is maintained)
D/E ratio
Careful selection of investment
Cash Generation Plan
Reduction of inventory
Promotion of securitization
Selling of assets, etc.
Amount of Cash
40 bn
15 bn
65 bn
Create cash by own efforts TTL about 120 bn
Thoroughness of financial indicator management.
Distribution of funds to growth areas.
Consideration of optimal financing method according to business characteristics.
D/E ratio: About 1.3 times in FY2015
Information sharing in Kobe Steel Group and creation of new “Only One”
products by utilizing technology Strengthening leading‐edge technology and basic technology for maintaining
competitive advantage in the medium to long term
Development of training programs for specialists and global human resources Skill transmission and building a system for the training of engineers
15 KOBELCO VISION “ G ”
Enhancement of Human Resource Development
Technological Development Strengthening
Going beyond the current framework of the organization, visualization, synergy
from the fusion of technologies Reduction of Quality Failure Cost by thorough management of quality
“Monozukuri-ryoku” Strengthening
Cultivating a compliance-sensitive culture Contributing to local communities and environmental conservation
Enforcement of Compliance and Contributing to Society
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For FY2015 (FY2012 actual →FY2015 medium-term plan) exchange rate factor, etc.
FX premise
US$1=¥95
◆ordinary income and loss(bn)
Strengthening the Profitability of the Steel Business: +60bn
Improving the Competitiveness of the Company:+15bn
[Machinery] Sales expansion in natural resource, environmental & infrastructure fields
[Material] Sales expansion in automotive and energy fields
Securing Sales 2
Improvement in profitability 1
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Step for Stabilization and Growth
Rebuilding the Business Foundation
Preparation for Stabilization and Growth
Stabilization and Growth
FY2012 FY2013 FY2014 FY2015 FY2020 ∬
Strengthening the Profitability of the Steel Business
Securing Sales Volume in Growing Sectors and Regions
Improving the Competitiveness of the Company
Improving Financial Performance
Reform Structure of Steel Business
Strategic Expansion of Machinery Business
Expansion of Electric Supply Business
19 KOBELCO VISION “ G ”
Reform Structure of Steel Business (1) Medium- to Long-Term Business Environment
Japan Steel demand is estimated to gradually decrease, due to the expansion of overseas production and the decrease in population
East Asia Steel supply is estimated to increase, as operations are planned to start up in new steel works located in East Asia
Competition will become more intensified while cost competitiveness will control the future of the steel business
20 KOBELCO VISION “ G ”
Reform Structure of Steel Business (2) Create Profit by Strengthening Profitability
Steel demand is estimated to decrease, based on medium- to long-term forecast on the trends in Japan and overseas. Further strengthening of cost competitiveness is vital.
Structural Limitations: < Kobe Works > ● Small scale compared with Kakogawa Works ● Not equipped with raw material pretreatment facilities such as coke ovens and sinter plant ● Dependence of Raw Material Supply from Kakogawa Works or outside source < Kakogawa Works> ● Expected Surplus Capacity due to the Demand Decrease
・Shut down upstream production mills - Blast Furnace, Hot-Metal Pretreatment, Ladle Refining, Continuous Casting, Blooming, etc.
・Continue downstream operations - Wire & Bar Rolling
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Reform Structure of Steel Business (3)
Kobe Works
Kakogawa Works
・Cover the capacity reduction at Kobe Works by increasing upstream operations ・Increase the production of intermediate products to Kobe Works - Construct new Continuous Bloom Caster and Ladle Refining Equipment
- Increase production capacity of Bloom Mill, transfer capability of intermediate products
Upstream production at Kobe Works will be transferred around FY2017 to Kakogawa Works, which has cost advantage in
ironmaking and steelmaking.
Expected Investment Amount will be JPY50 billion
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Reform Structure of Steel Business (4) ◆ Strengthening cost competitiveness through process transfer to Kakogawa Works
→ Cost reduction in ironmaking process (Improvement in tapping ratio of molten iron, reduction of coking cost, etc.) → Cost reduction in steelmaking process (Reduction of consumption ratio in steelmaking) → Other cost reductions (Improvement in utility efficiency, reduction of fixed costs) ◆ Quality improvement and strengthening delivery capability by utilizing the new, state-of-the-art continuous caster and refining equipment
◆ Expansion of sales and profit through total cost reduction
◆ Sales expansion of “Only One” products (Special steel wire rod & bar, automotive high strength steel sheet, heavy steel plate for energy sector)
Return on Process Transfer & Equipment Investment: More than JPY15 billion/year
23 KOBELCO VISION “ G ”
Reform Structure of Steel Business (5) 第3高炉 溶銑処理 転炉 第3連鋳 第3分塊 棒鋼ミル
溶鋼処理 第5連鋳第7線材ミル
溶鋼処理 第2連鋳 第8線材ミル第2分塊第2高炉 溶銑処理 転炉
ブルーム連鋳
第3連鋳 薄板ミル
第4連鋳No.1ストランド
第3高炉
溶鋼処理
神戸製鉄所
*第3分塊は
一部稼働
(能力増強)(増設)
(新設)
加古川製鉄所
内容積
2,112㎥
内容積
5,400㎥
*主原料は購入、横持ち 2017年度を目処に休止予定
第4連鋳No.2ストランド
厚板ミル第1分塊
Kobe Works
No.3 BF pretreatment LD converter Ladle refining No.3 CC No.3 Blooming Bar mill
Ladle refining No.5 CC No.7 Wire rod mill
Volume 2,112m3
Volume 5,400m3
Volume 4,500m3
No.2 BF
No.3 BF
pretreatment LD converter Ladle refining
install
No.2 CC
build up
No.2 Blooming No.8 Wire rod mill
install
New CC
No.3 CC
No.4 CC #1 & #2 str. Slabbing
Hot strip mill
Plate mill
Kakogawa Works
Aiming at fiscal 2017, Kobe plans to shut down the upstream equipments.
Growth Markets
Business Expansion in Growth Markets
24 KOBELCO VISION “ G ”
Emergin
g nation
s
and
North
Am
erica, etc. Growth Fields Growth Areas
Automotive field
Energy field
Natural resources &
environmental fields
Infrastructure field
Created by new “Only One” products and services
Alliances, M&A
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Strategically Expanding the Machinery Business
Establishment of optimal global production network (with bases in Japan, China, Thailand & India), which utilizes GEC
Reenter the European and North American markets (previously CNH’s territories) and recapture market share
Kobelco Construction Machinery Play active role from Asia as true global Company.
Maximize opportunities in shale gas revolution
Strengthen the competitiveness of MIDREX® Process, and maximize orders. (North America and Russia)
DRI process
Nonstandard compressor production bases in Japan, the U.S., and China. Active expansion of the compressor business, aiming at global deployment through M&As, tie-
ups, etc.
Compressor Business Global business covering Asia, America, and Europe
26 KOBELCO VISION “ G ”
Binary cycle power generation and steam electric generation Product line-up for hydrogen stations for automobiles Materials and welding consumables for reactors and marine structures
Automotive lightweighting
Next-generation cars (Engine, HV/EV)
Energy Fields
Promotion of technical fusion
by project activities across the Kobe Steel
Group Power train components Material for fuel cells
Steel-Aluminum => Hybrid-Materials Multi Materials (High strength steel, aluminum panels)
Promote Project Activities Across the Kobe Steel Group
27 KOBELCO VISION “ G ”
To expand the power supply business as a stable profit base, taking advantage of
management know-how.
For over half a century, we have been operating our own inhouse generation facilities. GTCC power generation equipment using blast furnace gas is under operation at Kakogawa
Works. We are managing the IPP business through Shinko Kobe Power Inc.
Scale Fuel Plant
Shinko Kobe Power Inc. 1.4MW Coal Boiler-turbine
In-house Power Generation (Kakogawa & Kobe Works)
About 0.6MW
Byproduct gas Heavy oil, LPG, LNG ,etc.
Boiler-turbine and Gas-Turbine Combined Cycle(GTCC)
We’ve accumulated many years of know-how in power generation. We have experience in using coal and gas as fuel. We operate boiler turbines, GTCC
systems and other equipment. We have even undertaken plant construction.
Electricity produced
Shinko Kobe Power Inc. Expand the Power Supply Business(1)
28 KOBELCO VISION “ G ”
Kobe Steel will also study the possibility of using the land made available after shutting down the blast furnace at Kobe Works for the power supply business.
Japan’s first power station to be located inland in Moka, Tochigi Prefecture (Start-up of operations is targeted to commence between 2019 and 2021.)
Total Generation Capacity Method of Generation Fuel
about 1.4 million kW GTCC City Gas
The U.S. Government has permitted the export to Japan of natural gas including shale gas. The price of fuel for power generation will come down.
This will contribute to social requests such as distributed power supplies inland and local economic development
This power station will cover about 40% of the demand for electricity in Tochigi Prefecture.
Expand the Power Supply Business (2)
29 KOBELCO VISION “ G ”
Considerations for Management Platform
Consider the best management platform to meet
changes in the business portfolio
Materials Machinery
Power Supply
KOBELCO VISION “ G ” 30
Establishing a Stable Profit Base
Reform Structure of Steel Business
Expansion of Power Supply Business
Strategic Expansion of Machinery Business
Promoting Project Activities Across the Kobe Steel Group
1. Strengthening the Profitability of the Steel Business 2. Securing Sales Volume in Growing Sectors and
Regions 3. Improving the Competitiveness of the Company 4. Improving Financial Performance
Rebuild the Business
Foundation
Focusing on Growth Markets
Stable Profits and Business Growth
Ensuring Safety and Disaster prevention Corporate Culture with an Enhanced Sense of Compliance and Self-discipline
Steps to Achieve KOBELCO VISION “ G ”
Considerations for Management Platform
KOBELCO VISION “ G ” 31
Company's Performance in Coming 10 Years
D/E Ratio (Right side)
Ordinary Income
(left side)
◆Ordinary Income(billion yen & D/E ratio (times))
Aiming to achieve D/E ratio of 1.0 from FY2016
onwards
Dividend Policy
32 KOBELCO VISION “ G ”
[Dividend Rate:15%-25% of consolidated net income as a rough indication]
Dividends remain stable and continuous
Making decisions comprehensively considering the following:
① Actual results and dividend rate ② Future investments and financial standing
Aiming to Resume Dividend Early
35 KOBELCO VISION “ G ”
Iron & Steel Business
Return the Iron & Steel Business to profit in fiscal 2013 through effective capital investments and the results of numerous cost reduction measures.
Maximize sales volume by strengthening responses to the local procurement needs in overseas markets for special steel wire and rod, expanding sales of steel plate for the energy sector, and establishing a global supply network (in North America and China) for automotive high strength steel.
Strengthen the aerospace sector and other fields in the titanium business.
Offering Competitive Technologies and Products, Maximizing Individuality
36 KOBELCO VISION “ G ”
Welding Business
Strengthen the competitiveness of the domestic welding business. (Shift to an optimum production structure.)
Maximize sales in the ASEAN region and in the energy and offshore structure fields.
Promote welding solution development.
The Most Trusted Welding Solution Company
37 KOBELCO VISION “ G ”
Aluminum & Copper Business
Consider a global supply network for automotive aluminum panel material.
Strengthen the Japan-U.S.-China supply network by increasing North American production capacity of aluminum forgings.
Expand sales of alloys for automotive terminals.
One of the Most Profitable Companies in the Industry
38 KOBELCO VISION “ G ”
Machinery Business
Promote global expansion of the compressor business.
Strengthen “monozukuri-ryoku” (manufacturing capabilities) across the entire Machinery Group.
Accelerating Globalization with Japan at the Core
39 KOBELCO VISION “ G ”
Engineering Business
Strengthen the competitiveness of the MIDREX® Process and maximize orders.
Contribute to earthquake reconstruction work.
Achieve early stable operation of the Minnesota ITmk3® plant. Plan for future projects.
Becoming a High-profit Business Utilizing Original Technology
40 KOBELCO VISION “ G ”
Kobelco Eco-Solutions
Strengthen the domestic business foundation.
Take the initiative in project-making for the water treatment business in the growing ASEAN region.
A global Company with a Presence in Environmental and Energy Fields Offering Distinctive Process Hardware and Services
41 KOBELCO VISION “ G ”
Kobelco Construction Machinery
Reenter the European and North American markets (previously CNH’s territories) and establish a global brand.
Establish a well-balanced, strong business structure that is unaffected by demand trends in China
Strengthen design and development capabilities of the Global Engineering Center in Itsukaichi, Hiroshima, “monozukuri-ryoku” (manufacturing capabilities), and the supply chain.
Building a Business that has Flexibility and Resilience to Deal with the Changing Business Environment
42 KOBELCO VISION “ G ”
Kobelco Cranes
Carry out cost reductions and eliminate inefficiency by innovation in production.
Contribute to domestic earthquake reconstruction work, and maximize unit sales in North America and Southeast Asia.
The Top Manufacturer of Lattice-Boom Crawler Cranes in the World
※LBCC : Latticed Boom Crawler Crane
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THE KOBE STEEL GROUP’S CORPORATE PHILOSOPHY
1. We provide reliable and advanced technologies,
products and services that satisfy customers.
2. We support each employee in developing his or
her abilities, while respecting mutual cooperation
within the Kobe Steel Group.
3. Through continuous efforts for innovative change,
we aim to enhance our corporate values.
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Cautionary Statement • Certain statements in this presentation contain forward-looking statements
concerning forecasts, assertions, prospects, intentions and strategies. The decisions and assumptions leading to these statements were based on information currently available to Kobe Steel. Due to possible changes in decisions and assumptions, future business operation, and internal and external conditions, actual results may differ materially from the projected forward-looking statements. Kobe Steel is not obligated to revise the forward-looking contents of this presentation.
• Uncertain and variable factors include, but are not limited to: – Changes in economic outlook, demand and market conditions – Political situation and trade and other regulations – Changes in currency exchange rates – Availability and market conditions of raw materials – Products and services of competing companies, pricing policy, alliances, and
business development including M&As – Strategy changes of alliance partners